Options Trading News

March 14, 2013  Thu 3:47 AM CT

Best Buy has gone on a surprising run this year, and one trader is betting that it has a bit more to go.

optionMONSTER's Heat Seeker system shows that a trader bought 2,500 April 22 calls for $0.73 and sold 5,000 April 24 calls for the bid price of $0.24. This is a new call spread, as the volume was well above the previous open interest of fewer than 500 contracts at each strike.

The call vertical, also known as a ratio spread because one strike saw twice as many contracts trade as the other, cost $0.25 to open. That is the maximum potential loss with BBY anywhere below $22, while the maximum gain would be realized with shares up at $24. Above that level, the faces the obligation to sell shares at that price. (See our Education section)

BBY gained 3.3 percent yesterday to finish at $20.96, its highest close since early July. The electronics retailer was at a 13-year low of $11.20 at the end of 2012 and has not closed above $24 in a year.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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